Not surprisingly, with the new US administration bringing in new policies to support digital asset regulations, US banks have been asking Fireblocks what opportunities this creates for them.
In a recent webinar with American Banker, we polled US banks to get insights into how they are incorporating digital assets into their strategies. Here’s what we found.
44% of Banks Already Taking Action on Digital Assets
Our first question was on institutional readiness and the results were not surprising. The majority of banks—56%—are just beginning their digital assets journey. This is mainly attributable to the regulatory landscape in the United States over the past few years and the recent shift to fostering policies that aim to strengthen the digital assets sector.
Interestingly, we saw that 28% of participants are actively identifying use cases, and 16% are already engaged in Proof of Concepts or pilots—which means 44% are taking tangible action. These banks are doing the ground work now so that they will have the right product-market fit and expertise when the regulatory environment is clarified.
Payments Tops the List of Digital Asset Use Cases for U.S. Banks at 36%
Banks have a choice of services and solutions they can build to monetize digital assets. Top of the list at 36% was payments, comprising merchant settlement, B2B cross-border transactions, and internal treasury management.
This enthusiasm around payments also reflects the fact that stablecoins are gaining traction as a medium for exchange and settlement. Stablecoins introduce new efficiencies into bank operations and open up new markets and products, positioning banks as pivotal players in the ecosystem for fintech companies, payment processors, and merchants alike.
Custody services took the second spot at 24%. Banks—especially those equipped with wealth management platforms—already face competition from new crypto-native and fintech players to provide custody and trading for crypto and stablecoins. This strategy keeps these funds in house when existing institutional and individual clients adopt digital assets and attracts new clients.
Tokenization barely beat out lending to take the third spot at 18% as an important use case for banks. By converting assets such as money market funds into digital tokens, banks can take advantage of blockchain’s unique ability to expand asset accessibility and liquidity by enabling instant settlement, 24/7 asset movement, and fractionalization.
Lending came in fourth with 17% of participants’ interest, despite recent buzz in the market. This use case offers promise because it allows banks to offer loans secured against crypto assets, opening up avenues to serve tech and crypto-native clients and diversify risk profiles
While markets and ecosystems are still evolving, my experience at Fireblocks shows that it is critical to ensure that banks make their use case selection with these two questions in mind:
- is it relevant to their institution’s core business, and
- how will it be adopted by a set of target customers?
What Obstacles Do Banks Face in Their Crypto Journey?
Despite moves by the U.S. Administration to provide guardrails to operate within, regulatory clarity around digital assets remains a top concern at 28%, echoing a persistent narrative from US banks over recent years. But I am confident that we will see meaningful frameworks put in place in the near future, as I suggested earlier this year.
It also came as no surprise that 25% of respondents cited knowledge and expertise and 23% said security and compliance as concerns. This indicates a need for banks to expand their internal capabilities and establish strong governance mechanisms to navigate these challenges. Doing this during the proof of concept phase is crucial to ensuring the eventual solution will scale efficiently.
Having helped many of the first movers and innovators over the past few years, I advise that banks can mitigate these risks by involving the impacted teams across the organization from the very beginning, from business lines to technology, risk, legal and compliance. It is also imperative to have a committed executive stakeholder ensuring their active engagement. I have seen the evolution of digital asset projects across institutions of all sizes, and ensuring that there is alignment across all stakeholders is critical to success.
The Road Ahead
The bottom line is that while it is still early days for US banks to enter the crypto and digital asset markets in a meaningful way, the regulatory clarity that we are expecting and the depth of tangible use cases with proven benefits gives us a bright light at the end of the tunnel.
Fireblocks has been working with the banks that have been first movers and innovators around the globe over the past six years, including BNY Mellon, SCB, BNP Paribas, ABN Amro and Wenia, laying the groundwork for other institutions to participate as these use cases begin to scale. It is exciting to see US banks begin to accelerate their crypto journey.
Our digital asset infrastructure is built for scale and trusted for security. Whether it is in custody, trading, payments, tokenization, or lending, Fireblocks empowers US banks to establish a leadership position in the digital asset space.